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Franchise Myths & Realities

Myth #1
Franchises offer a better chance for success than starting your business on your own.

Myth #2
Franchisors know more than you do about running a business.

Myth #3
A franchise business has been tested and proven successful or it can't be franchised.

Myth #4
A trademark gives your business extra strength in the market and a better ability to compete.

Myth #5
You don't have to work as hard to start and run a franchise as you do an independent business.

Reality #1: Any business concept can be offered as a franchise, but a lot goes into a successful business. Franchises can offer a better chance for success only if it gives you more than you would have doing it on your own. Sometimes the only real value to buying a franchise is that it commits you to following through on the process of preparing and starting a business.

Reality #2: Well, Franchisors should know more, but not as often as is believed - or expected. The depth of the business expertise, management and leadership skills of those who run the franchisor company may or may not be "relevant competencies" to the business of growing a franchise system - or the particular business model being franchised. After all, a franchisor must run two very different businesses, the franchised business and the business of franchising.

Reality #3: There is no law, no requirement that a business being franchised must be tested or meet any type of standard of any kind. Franchising is extensively regulated and various laws govern the information that must be given to any prospective buyer. Nothing, however, can assure the buyer of the quality or viability of the franchise business.

Reality #4: A trademark is valuable only to the extent it is known and associated positively with the franchise business, the relevant industry or other strong market position. When a trademark is federally registered, that means only that the particular word(s) and or logo have met a minimal standard of uniqueness in connection with the applicable goods or services and that it has been used or will be used in the commercial marketplace.

Reality #5: The value of a franchise comes from having a template, a system for operating and marketing a business. It does not mean the business will run itself! Nor is there any assurance the template and system will work well or smoothly in your time and space. No buyer should suspend critical judgment nor skip the fundamentals of good business, e.g. sound financial and overall business planning, careful and timely implementation, thorough market research and above all hands on participation in the start-up and on-going operation.

©K. Tidd, 2004

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